The function of the ABC transporter Atm1p located in the mitochondrial inner membrane is not yet known. To study its cellular role, we analyzed a mutant in which ATM1 was disrupted. Delta atm1 cells are deficient in the holoforms, but not the apoforms of heme-carrying proteins both within and outside mitochondria, yet both synthesis and transport of heme are functional. Delta atm1 cells are hypersensitive for growth in the presence of oxidative reagents, and they contain increased levels of the antioxidant glutathione, in particular of its oxidized form. Mitochondria deficient in Atm1p accumulate 30-fold higher levels of free iron as compared to wild-type organelles, i.e. three-fold more than mitochondria deficient in frataxin, the protein mutated in Friedreich's ataxia. The increased mitochondrial iron content may be causative of the oxidative damage of heme-containing proteins in delta atm1 cells. Our data assign an important function to Atm1p in mitochondrial iron homeostasis.